A brand new not-for-profit lender has been launched this week to give people on low incomes and those with poor credit histories an alternative to using doorstep loan companies and loan sharks.

My Home Finance has been unveiled by Iain Duncan Smith the Secretary of State for Work and Pensions, and will offer those who are excluded access to credit by banks and other normal methods a place to go that is safer than a loan shark.

People will need to have a face to face interview, and then those eligible will be able to borrow modest sums of money (around £500) to help buy necessary everyday items such as washing machine, cooker, school uniforms etc.

Money will then be repayable weekly, and will be charged at 29.9% interest which although a fair bit higher than a bank might charge, is considerably less than the typical 100-200% APR that a doorstep lender might charge.

People visiting My Home Finance will also be given debt advice and help opening a bank account to encourage them to save money too. The group will be run in partnership with the department for work and pensions, Royal Bank of Scotland, 26 housing associations and the Wates Foundation. It will be one of the largest not-for-profit financial service providers in England.

Branches are already open in Hereford, Worcester, Walsall, and South Birmingham, with 10 more branches being opened by the end of October, across the west midlands area. If the pilot scheme is successful, more branches will open across England with plans to advance 150,000 loans to low earners over the next 10 years.

It is known that around 2.5 million people currently borrow from doorstep lenders, while around 200,000 people are estimated to have turned to loan sharks. This scheme should see the poorest people who are struggling with debt now, more able to get access to credit and advice on how to avoid unsustainable levels of debt.